Tenant Foreclosures Highlight Need for Statewide “Just Cause”

With the mortgage crisis leading to mass foreclosures, right-wing pundits are blaming one set of victims – homeowners who got into bad arrangements they couldn’t afford. But what about renters who suddenly lost their homes, because their landlord didn’t pay the mortgage? Unless they live in San Francisco, Oakland, Berkeley, Los Angeles or other California cities with “just cause” for eviction, tenants are simply out of luck. And in a report just released by Tenants Together, tenants in foreclosed properties are always the last ones to know.

While much attention has been focused on homeowners duped by greedy lenders, the mass displacement of renters who did nothing wrong cries out the need to have “just cause” statewide. At the very least, measures to protect these tenants are absolutely essential. The California state legislature passed some reforms last year to aid tenants in foreclosed properties, but Governor Schwarzenegger – who also killed the renters’ tax credit for seniors and the disabled – vetoed practically all of them. With foreclosures directly affecting 225,000 tenants in California, this is a crisis we must address.

Tenants in Just Cause cities cannot be evicted without a valid reason – such as failure to pay rent, damaging the property, illegal activity, building demolition or owner move-in. Just Cause – as opposed to “just ‘cause” – gives renters the peace of mind that provided they live up to their side of the agreement, there is little to worry about. A new property owner “steps into the shoes” of the old one – whether that be a new landlord, or the bank because the old landlord didn’t pay the mortgage. What kind of arrangement they got into to purchase the property shouldn’t concern you, because you were not consulted.

But more tenants are learning – with tragic results – that it does concern them, and they suddenly have to move out because someone else didn’t pay the bill. Property owners know for months that a foreclosure is imminent, as the bank sends them Default Notices when they’ve missed a mortgage payment. Banks aren’t required, however, to tell the tenants about anything – until the landlord has foreclosed, and a Trustee Sale has been scheduled in 20 days. Suddenly, the tenant who’s been paying rent all along has to pack their bags – because someone else will own the property in less than three weeks.

San Francisco Assessor Phil Ting has launched a local program where tenants living in properties subject to foreclosure get the Default Notices mailed to them as well – along with information about their rights in the process. But this notice should be a statewide requirement – especially in cities where tenants don’t have just cause protections.

State law gives tenants sixty days notice for a “no-fault” eviction – but when the property is being foreclosed that almost never happens. First, some banks have an explicit policy of emptying the building of tenants before a Trustee Sale. Oakland even had to sue some banks for blatantly violating its Just Cause ordinance. Second, Tenants Together cited a scary statistic in its report: 60% of tenants in single-family homes who called their Foreclosure Hotline were in properties incorrectly listed as “owner-occupied.” In other words, the bank didn’t know any tenants lived there – and failed to follow any procedures that are required for tenants in foreclosed properties (such as the 60-day notice requirement.)

In recent years, California has passed laws to help homeowners facing foreclosure. For example, banks are now required to contact the property owner – or at least exercise due diligence – thirty days before filing a Notice of Default. Homeowners also now get an extra 90 days before the property gets sold – if the bank doesn’t have a comprehensive loan modification program. What changes did tenants get? Not much: (a) the Notice of Sale (which they only get 20 days before the property gets sold) must include specific language about their rights, and (b) foreclosure eviction notices went from 30 to 60 days.

But the real scandal is how many more bills passed the state legislature, only to get a veto by the Governor. AB 1333 would have stopped utility shut-offs after a foreclosure – an all-too-common occurrence where the bank deprives tenants of water or power. Or when the soon-to-foreclosed landlord stops paying the utility bills, state law allows tenants in multi-unit properties to assume the bills and deduct it from their rent. AB 2586 would have extended that right to tenants in single-family homes, as well as clarify that banks who take over rental property are responsible for the tenants’ security deposit.

Arnold Schwarzenegger – who owns rental property in Santa Monica – vetoed both of these bills that would have directly helped tenants facing foreclosure. He also used his “line-item veto” power to terminate the renters’ tax credit – a $347/year credit that senior and disabled tenants depend on each year. While the Governor gets away with his “post-partisan” image, Arnold is insensitive to the plight of tenants in this most unfortunate of circumstances. Maybe he could redeem himself by pushing a statewide “just cause” bill.

Paul Hogarth

Paul Hogarth is the Managing Editor of Beyond Chron — an alternative online daily based in San Francisco providing news coverage ignored or distorted by the San Francisco Chronicle. He is a tenants’ rights attorney at the Tenderloin Housing Clinic, an active member of the Harvey Milk LGBT Democratic Club and was an elected official on the Berkeley Rent Board from 2000-2004. He lives in San Francisco.

About Paul Hogarth

Paul Hogarth is the Managing Editor of Beyond Chron -- an alternative online daily based in San Francisco providing news coverage ignored or distorted by the San Francisco Chronicle. He is a tenants' rights attorney at the Tenderloin Housing Clinic, an active member of the Harvey Milk LGBT Democratic Club and was an elected official on the Berkeley Rent Board from 2000-2004. He lives in San Francisco.

Comments

California does have those guidelines in place on foreclosures and the banks seems to be quite behind. I know they’re still processing their lists so it will be interesting to see how the market fares here this year and next.

Thanks for this article. My blog urges tenants to notify the lender in writing of their existence when they receive the Notice of Trustee Sale. Not only does this protect tenants in communities with just cause eviction, but it also protects tenants when the lender decides to "evict" an alleged owner-occupier and sidestep the tenant notice requirements altogether.

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